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Last updated: November 11, 2013 4:26 pm
Lonmin’s new chief executive said further productivity improvements were needed as the world’s third-largest platinum producer by volume turned round its performance and returned to profit.
The South Africa focused miner reported pre-tax profits of $140m in the year to the end of September, contrasting with a loss of $698m in the previous year when Lonmin was at the heart of violent industrial unrest in the country’s platinum sector.
A measure of stability has returned this year and Lonmin produced 751,000 platinum ounces in concentrate – its highest level in six years. The company has moved from having net debt of $421m in 2012 to holding net cash of $201m this year.
Ben Magara, who took over as chief executive in July, said some business areas were showing their best performance in years.
“What is happening on the ground is very pleasing,” said Mr Magara. “We still need productivity to come up . . . we need to move from creating operational credibility into operational excellence.”
Platinum demand is closely correlated with Europe’s economic performance, partly because of the metal’s use in the motor industry. Mr Magara said there were some positive signs in Europe. “We are optimistic about the long term but in the short term we have to tighten our belts,” he said.
Lonmin has forecast raising its platinum sales to 750,000 ounces next year, up from 696,000 ounces in the 12 months to September.
Analysts at JPMorgan said: “We think the result builds on a nascent track record of ‘under-promising’ and ‘over-delivering’.”
The group remains in challenging wage negotiations with the Association of Mineworkers and Construction Union, which has grown rapidly to dominate the platinum sector in the wake of last year’s strikes.
That unrest escalated after police shot and killed 34 striking Lonmin miners outside the company’s Marikana mine in August 2012, plunging the group into the centre of a political crisis in South Africa at a time when it was under huge financial pressure.
Lonmin secured a financial lifeline after raising $800m in a rights issue last November and fending off a reverse takeover bid by Xstrata, now part of Glencore, which has a 24.5 per cent stake in Lonmin.
This year, Amcu is negotiating with companies at formal wage talks for the first time. It is demanding that minimum wages for entry-level miners more than double to R12,500 ($1,200) a month, the rallying call at last year’s strikes. Companies have rejected the demands and Amcu has declared a wage dispute with Lonmin but not yet initiated formal strike action.
While there has been less sustained strike action in South Africa’s mines this year, labour relations have been volatile with sporadic strikes erupting and a bitter rivalry between Amcu and the National Union of Mineworkers fuelling tensions in the industry. More than a dozen Lonmin employees have been killed in violence around its mining areas this year, although the causes have not been clear.
South Africa is the world’s top producer of platinum and home to about 80 per cent of the proven reserves of the precious metal.
Lonmin shares rose 3.9 per cent to 340.9p.
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